Proposed changes to OSC rule governing abusive trading practices
The OSC’s proposed changes could unintentionally restrict capital-raising activity and increase compliance burdens for firms operating in Ontario’s markets.
Submission – OSC – Proposed amendments to OSC rule 48-501 trading during distributions, formal bids and share exchange transactions, and its companion policy
Recipients
- Ontario Securities Commission (OSC)
Industry segments this resource supports
- Capital markets
Summary
Our submission responds to the OSC’s proposed amendments to Rule 48 501, which governs trading during distributions, formal bids, and share exchange transactions. While we support the OSC’s goal of curbing manipulative and deceptive trading, particularly abusive short selling, we caution that the proposed changes may negatively affect capital formation, increase costs, and reduce Ontario’s competitiveness. We recommend targeted refinements and stronger enforcement of existing rules rather than broad new restrictions that could disrupt efficient market activity.
Why this matters: The OSC’s proposed changes could unintentionally restrict capital-raising activity and increase compliance burdens for firms operating in Ontario’s markets.
Key takeaways
- SIMA supports the OSC’s objective of enhancing market integrity and addressing abusive short selling but warns that the proposed amendments may have unintended consequences for capital formation and market competitiveness.
- SIMA highlights that increased complexity, regulatory duplication, and lack of national harmonization could raise costs and reduce access to capital.
- SIMA argues that dealers should not be assigned new gatekeeper responsibilities for monitoring client exemptions or trading conduct, as they lack full visibility across intermediaries.
- SIMA recommends exempting bought deals and private placements because their structure does not present the same risks as marketed offerings.
- The definition of “short sale” should align with existing market regulation to avoid discouraging legitimate trading strategies.
- SIMA questions the appropriateness of adopting a five day restricted period modeled on U.S. Rule 105, noting that it may not reflect Canadian market realities and should not extend beyond pricing.
- SIMA encourages the OSC to pursue targeted refinements and enhanced enforcement rather than broad new restrictions that could hinder innovation and investor participation.
